Testimony for EPA, June 29, 2014, by Cathy Carruthers, 

for ETR-US.ORG 

I am Cathy Carruthers, President of Environmental Tax 

Reform — US. I am a retired energy economist. 

The current draft rule for power plants and the original 

existing implementing rules of 111(d) do not 

straightforwardly allow states to adopt a carbon excise tax 

as an "emissions standard." 

We would like EPA to modify the definition of "emissions 

standard" to clearly allow states to tax GHG emissions 

from power plants and other sources. The rule could 

encourage states to look at this solution. 

We value the extensive work and the data you have 

provided as background for decision making and for the 

Regulatory Impact Analysis. 

Given that this rule making is data driven we are providing 

additional data and four economic studies on the effect of a 

carbon tax for the US and for 3 individual states. 

We request that EPA look at the potential cost savings 

available to states if they choose to use a revenue neutral 

carbon tax. 

Each of these four studies was done by Regional Economic 

Modeling Incorporated (REMI). REMI is used by many 

state governments for analysis of tax policy. The US study, 
which was done for this rule making, relies on the Regional 

Energy Deployment System (ReEDS), which was 

developed by the National Renewable Energy Lab. NREL's 

work is highly regarded by the power sector. 

The first study is for 9 regions of the US. It reviews the 

impact of a tax equal to the social cost of carbon, which 

EPA used in its analysis. 

The national study shows that a revenue neutral tax on 

carbon dioxide will meet the EPA goals. Compliance costs 

are reduced if the carbon tax is coupled with reductions in 

corporate and personal income taxes, and with an increase 

in the earned income tax credit. 

• All the tax rate scenarios reduce emissions from power 

plants and meet EPA's new Carbon Rule goals. Even 

the low Social Cost of Carbon scenario creates 

sufficient reductions in power-based emissions to meet 

the requirements of EPA's new Carbon Rule by 2027, 

when the marginal price on carbon dioxide is $15.75 

per metric ton in 2012 dollars. 

• All scenarios reach the targeted emission reductions 

earlier than required under the draft rule. 

In addition this solution improves the economy, indicating 

the costs forecast in the Regulatory Impact Analysis may 

be higher than they need to be. 

• All scenarios increase national gross domestic product 

(GDP). 
• All scenarios increase total employment in all regions 

of the US. 

In addition we are providing economic studies for 

California, Massachusetts, and Washington. Each of these 

studies shows that: 

• The states can more than meet the goals laid out in the 

rule using a carbon tax. 

• Reductions in Carbon Dioxide take place faster than 

the Carbon Rules require. 

• In each state, the tax reductions that best fit the state 

differ depending on the existing tax structure. 

• Environmental tax reform based on a carbon tax can 

improve the economy. 

In short, a carbon tax coupled with reductions in other taxes 

for each state may be a faster, better, cheaper way to obtain 

the goals in the draft rule. 

Given this set of analyses we respectfully request that EPA 

modify the definition of "emissions standard" to clearly 

allow states to use a tax on GHG emissions.